Wealth creation for your retirement!
First You Know more about NPS (National Pension System).
What is NPS (National Pension System)?
The National Pension System maybe a pension scheme introduced by the Govt. of India to assist Indian citizens create a retirement corpus. Under this, you'll make systematic contributions in an exceedingly profitable avenue that will provide you market-linked returns and a daily income in your post-retirement life.
Any of the India citizen (both resident and Non-resident) between the age of 18-60 years can join NPS (National Pension System). Overseas Citizen of India(OCI) also are eligible to affix NPS.
NPS may be a smart model that permits you to draw an investment plan for retirement in a very proactive manner. It falls in line with the basic principle of investing that encourages people to start out investing from an awfully early age to enjoy greater wealth accumulation.
Why should we invest in NPS?
Benefits of National Pension System (NPS).
NPS allows a subscriber to accumulate a corpus for retirement. NPS ensures regular pension income within the hands of the subscriber. A subscriber can withdraw up to 60% of the accumulated corpus at the age of retirement that means 60 age. The remaining corpus will be converted into an annuity, thus proving an everyday pension income.
2. Extra Rs. 50,000 deduction from Taxable Income
Additional deduction of up to Rs.50,000 is availed under section 80 CCD(1B) over and above Rs. 1.5 Lakh deduction under section 80C. you'll also invest up to Rs. 1.5 Lakhs in NPS under Section 80C.
3. Market linked returns
National Pension System (NPS) allows a subscriber to speculate in four asset classes like Equity, Corporate debt, Government Bonds and Alternative investment. NPS subscriber can decide allocation amongst there 4 asset classes.
4. Auto rebalancing
NPS provides auto-rebalancing choice to the subscriber. The portfolio is rebalanced once per annum. NPS automatically rebalances the portfolio on the subscriber’s age, shifting allocation from equity to debt because the subscriber grows older.
5. Choice of Pension Fund Manager
NPS allows a subscriber to decide on from 7 Pension fund managers that are appointed by PFRDA ( Pension Fund Regulatory and Development Authority of India). A subscriber can choose a fund manager supported the record of the manager and preference. At present, you'll be able to choose anybody of the subsequent pension funds:
- ICICI Prudential Pension Fund
- LIC Pension Fund Ltd
- Kotak Mahindra Pension Fund
- SBI Pension Fund
- UTI Retirement Solutions Pension Fund
- HDFC Pension Management Company Ltd
- Birla Sunlife Pension Management Ltd.
SOME FEATURES OF NPS.
PRAN Generation:- NPS allows a subscriber to settle on from 7 Pension fund managers that are appointed by PFRDA( Pension Fund Regulatory and Development Authority of India). A subscriber can choose a fund manager supported the account of the manager and preference. At present, you'll be able to choose any one of the subsequent pension funds:
Fund Management: Pension Funds are responsible to manage your pension corpus and invest your fund contributions as per the investment guidelines issued by the PFRDA. Such guidelines are framed in an exceedingly manner that gives you with the optimal risk-return combination. The NPS portfolio is well-diversified that consists of state securities, Corporate Bonds, and Equities. At present, you'll be able to choose anybody of the subsequent pension funds:
1. HDFC Pension Management Company Ltd
A subsidiary of HDFC Life Insurance Company Limited. From 1st August 2013 enrolled under the NPS. It's become the youngest & fastest-growing pension fund manager within the industry. Mr Sumit Shukla is the Chief executive officer of HDFC Pension Management Company Limited.
As a PFM (Pension Fund Manager), it's entrusted to observe the market and economic trends to plan investment strategies that conform to the key risk parameters and PFRDA guidelines. With an extended-term investment philosophy, the corporate aims to maximise the likelihood of achieving your goals and objectives. It derives the boldness to convey the foremost fulfilling and rewarding investment experience from its seasoned portfolio managers who have vast experience in pension administration and asset management.
2. ICICI Prudential Pension Fund
A wholly-owned subsidiary of ICICI Prudential life insurance Company Limited. In May 2009 as a registered pension fund manager to manage the funds collected under the NPS for Indian citizens aside from government employees. Mr Sumit Mohindra is that the Chief executive officer of ICICI Prudential Pension Management Company Limited.
It draws strength and expertise of the parent company that has significant experience in managing future investments of life and pension funds and employee benefit funds and annuities for several corporates including PSUs. the corporate features a sound investment framework that focuses on safety, stability, and returns to deliver superior risk-adjusted returns over the long run. it's one amongst the foremost experienced fund management team within the private sector.
3. Kotak Mahindra Pension Fund
Kotak Mahindra Pension Fund Ltd. could be a venture between Kotak Mahindra Asset Management Limited and Kotak Mahindra Bank Ltd. In 30th April 2009 manage the funds under the NPS. The pension fund is an attempt on a part of the Kotak group to motivate individuals to save lots of towards their retirement. Mr Sandeep Shrikhande is that the CEO of Kotak Mahindra Pension Fund Limited.
The Kotak Group is one among India's leading financial organizations that provides a large range of economic services i.e. commercial banking, stockbroking, mutual funds, insurance, and investment banking. In a way, the group caters to the various financial needs of people and corporates.
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4. LIC Pension Fund Ltd
Under the sponsorship of LIC, is that the 1st pension fund company in India to receive the certificate of commencement. In 28th January 2008 to manage the pension contributions of the govt. employees. Ms Priti Panwar is that the CEO of LIC Pension Fund Limited.
LIC's aims to maximise the return on investment of its subscribers with the proper mixture of investment strategy that spans across different sectors. The steady growth of the corporate will be attributed to its robust fund management and scientific investing practices.
5. UTI Retirement Solutions Pension Fund
UTI Asset Management Company Ltd.'s wholly-owned subsidiary fund is UTI Retirement Solutions Ltd. From 31 March 2008 as a licensed pension fund manager to manage Pension Funds of state employees. Mr Balram P. Bhagat is that the CEO of UTI Retirement Solutions Ltd.
The company aims to be the foremost innovative and technically sound wealth creator. it's focused on the investor and needs to produce customer satisfaction through a highly motivated staff. Also, it plans to be a socially responsible organization that's known for its best corporate governance. It endeavours to supply advice that's innovative and technically sound and be a structured point of sales for NPS.
6. SBI Pension Fund
In 14 December 2007 SBI Pension Funds Pvt. Ltd. started its business as a union govt company. SBI manages pension funds for corporates, banks, government employees, and Atal Pension Yojana. It the foremost reliable name within the Pension Fund Management domain and therefore the largest pension fund manager (PFM) amongst all the PFRDA-approved PFMs for NPS. Additionally, it's been classified because the ‘Default Pension Fund Manager’ by PFRDA. Mr Narayanan Sadanandan is that the CEO of SBI Pension Funds Pvt. Ltd.
SBI manages around 60% market share of the asset under management under the private sector. It ensures that every one investments are administered as per the provisions of PFRDA Guidelines/ Directions. It follows an approach of quality and secure investment that delivers maximum profitability for its subscribers. the corporate holds expertise across asset classes and has an experienced and dedicated team to manage the subscriber’s corpus.
7. Birla Sunlife Pension Management Ltd.
Aditya Birla Sun life insurance Company Limited (ABSLI)'s owned subsidiary is Aditya Birla Sun Life Pension Management Limited (formerly called Birla Sun Life Pension Management Ltd.). From 5 May 2017 to manage the pension funds under the NPS. It also acts as a Point of Presence (PoP) through its physical and online platforms to distribute and service NPS-related tasks for the general public at large. Mr Sashi Krishnan is that the Chief military officer of Birla Sunlife Pension Management Ltd.
Aditya Birla leverages on the rich experience of its parent group Aditya Birla Capital Limited (ABCL) that features a strong presence in life assurance, asset management, private equity, corporate lending, structured finance, project finance, general insurance broking, wealth management, equity/currency/commodity broking, online personal finance management, housing finance, pension fund management, and insurance.
WITHDRAWAL NORMS:- Exit from NPS & withdraw the accumulated corpus subject to certain terms & conditions.
Withdrawal at the age of 60:
Redeem 60% of the accumulated corpus upon the attainment of 60 years old. You're required to get an annuity plan with the remaining 40% of the corpus. If the worth of your accumulated corpus is up to Rs 2 lakh, then you will withdraw the whole corpus in an exceedingly payment.
Withdrawal before the age of 60.
You can withdraw 20% of the accumulated corpus if you would like to exit before the age of 60 years. you're required to get an annuity plan with the remaining 80% of the corpus. If the worth of your accumulated corpus is up to Rs 1 lakh, then you will withdraw the complete corpus in an exceedingly payment. You would like to complete a minimum of 10 years before you'll be able to exit from NPS.
Upon your death, your nominee would receive the complete accumulated corpus and he/she would get a choice to purchase an annuity plan with the corpus received.
How to open an NPS account?
If you wish to open an NPS account, you may visit any authorised Point of Presence (PoPs) or any bank branch (private and public sector) that are enrolled to act as PoP. You need to submit the following documents to open an NPS account:
- Completely filled in subscriber registration form
- Proof of Identity
- Proof of Address
- Age/date of birth proof
- Cancelled Cheque (if applicable)
You can also open an NPS account online through eNPS if you have:
- Aadhaar Card, or
- PAN card with Savings account in one of the authorised banks that perform KYC verification online.
What are the tax benefits of investing in NPS?
Build wealth for post-retirement years with effective investments in NPS over the long run. additionally to this, NPS also offers tax benefits as follows:
Salaried Person
Your contributions towards NPS up to 10% of Salary (Basic + Dearness Allowance) are eligible for a deduction under Section 80CCD(1) of the taxation Act 1961, subject to a ceiling of Rs 1.5 lakh of Section 80C.
An additional investment of Rs 50,000 is eligible for a tax write-off under Section 80CCD(1B) of the taxation Act 1961.
Self-employed
Your contributions towards NPS up to twenty of Gross Annual Income are eligible for a write-down under Section 80CCD(1) of the taxation Act 1961, subject to a ceiling of Rs 1.5 lakh of Section 80C.
An additional investment of Rs 50,000 is eligible for a tax write-off under Section 80CCD(1B) of the revenue enhancement Act 1961.
Two types of NPS accounts are available for investment.
NPS offers you two varieties of accounts i.e. Tier I & Tier II.
The Tier I account is mandatory while you've got the choice to take a position within the Tier II account as an add-on voluntary savings facility. You become eligible to withdraw the retirement corpus from the Tier I account only upon the completion of 10 years from the date of opening of the account or on attaining the age of 60 years, whichever is earlier. However, within the case of a Tier II account, you'll make withdrawals at any point in time as per your requirement. Also, in Tier I, you're required to create minimum contributions of a minimum of Rs 1000 annually. But no such restrictions exist for a Tier II account with relation to the minimum frequency of contributions.
You may find a variety of popular tax-saving investment avenues available under Section 80C of the revenue enhancement Act 1961 like five-year Fixed Deposits (FDs), Public Provident Fund (PPF), ELSS funds, National Pension System, among others. However, you wish to think about your financial goals, risk appetite, and investment horizon to take a position within the right alternative.
FDs and PPF can fit the debt component of your overall investment portfolio and you will invest some portion of your portfolio towards them. But their fixed-income nature might not help in wealth accumulation. Besides, the lock-in period of 5 years and 15 years respectively makes them relatively less liquid.
Investing in ELSS Funds and NPS is smart to earn higher market-linked returns. you ought to know that NPS encompasses a higher lock-in period than ELSS funds that has the shortest lock-in period of three years. Additionally, if you would like to require aggressive exposure to equities, then you will not get that in NPS since the utmost allocation to equities is proscribed to 75%. As against this, you would possibly be happier with ELSS Funds that allocate as high as 90% of the invested corpus towards equities. In such a scenario, the chance profile of ELSS Funds would be beyond that of NPS.
Hence, supported these parameters, you'll be able to choose an instrument accordingly to fulfil your wealth creation and tax-saving goals.
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